International Business

The Precautions To Be Taken before Granting A Packing Credit For Export Under L/C

The normal credit appraisal norms used by the bank are applied in the case of grant of packing credit also. The bank has to decide on the basis of the borrower’s character, capital, capacity etc., besides his experience in exports.

In addition, the bank should judge if export would take place. This entails inquiring into if exchange control and trade control regulations have been or will be fulfilled.

Precautions To Be Taken before Granting A Packing Credit

(a) The applicant has an importer-exporter code number allotted by the Director General of Foreign Trade.

(b) The exporter’s name is not in the exporter’s caution list of Reserve Bank.

(c) The goods to be exported are not banned for export.

(d) The letter of credit/firm order provide all essential details like the type and quality of goods to be exported, price, quantity, shipment date, etc. They do not violate any of our exchange control regulation relating to terms and method of payment.

(e) There is sufficient time allowed in the letter of credit/firm order to enable the exporter to manufacture the goods and export them.

f) The country to which exports are to be made is not under political or economic stress, which may delay remittance of foreign exchange by the country. ECGC may help in getting information in this regard.

(g) If the letter of credit is restricted to some other bank, the exporter gives an undertaking to route the bills through the bank making the advance.

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